By Jonathan Stempel
March 2 (Reuters) – S&P Global said on Monday it may downgrade PacifiCorp, a utility owned by Berkshire Hathaway, to junk status as liabilities mount from class action litigation over a series of Oregon wildfires in 2020.
The warning came after an Oregon jury on February 25 awarded $305 million to 16 plaintiffs, or about $19 million per plaintiff, who blamed PacifiCorp for failing to turn off power lines during a Labor Day weekend windstorm. Plaintiffs in earlier trials had been awarded about $5 million on average.
S&P said it may cut PacifiCorp’s “BBB-minus” credit rating, the lowest investment grade, by at least two notches if future awards are around $19 million per plaintiff, and by one notch if awards are “significant” but smaller. It said it will closely monitor verdicts in the coming weeks.
Trials in the so-called James class action are scheduled through early 2028, and PacifiCorp’s immediate parent Berkshire Hathaway Energy said the utility faces $48 billion of potential payouts on top of $1 billion already awarded. PacifiCorp faces about $50 billion of wildfire exposure overall.
In response to S&P’s action, PacifiCorp said it plans to appeal the $305 million verdict, and is focused on “providing certainty” to employees, customers and communities.
PacifiCorp is awaiting a decision from the Oregon Court of Appeals on whether the class action was properly certified and whether claimants can recover damages for emotional distress.
Berkshire Hathaway Energy said a loss of investment-grade status could leave PacifiCorp unable to raise money to support ongoing operations, including paying suppliers and providing power to customers.
“PacifiCorp believes it will have sufficient liquidity to cover its operations and obligations beyond a year,” the parent added.
Berkshire Hathaway has high investment-grade credit ratings.
In his first annual letter to shareholders, Berkshire Chief Executive Greg Abel said on Saturday that the Omaha, Nebraska-based conglomerate accepts responsibility when it causes wildfires, but will fight unjustified claims in court.
“PacifiCorp is not an insurer of last resort and should not be treated as a deep pocket,” he wrote.
(Reporting by Jonathan Stempel in New York; Editing by Cynthia Osterman)
